CALGARY, Alberta (Reuters) - Land-access disputes between oil firms and northern Canadian native groups must be solved in six to 12 months or the companies may drop plans for a C$7 billion ($5.6 billion) gas pipeline to focus on U.S. liquefied natural gas projects, a top analyst said Wednesday.

Of the two major Arctic gas projects being proposed in North America, the Mackenzie Valley pipeline faces the biggest risk of being canceled due to its high-profile delays, said Tristone Capital analyst Chris Theal, author of a new 50-page report on the prospects for northern frontier gas.

Mackenzie partners Exxon Mobil, ConocoPhillips and Royal Dutch/Shell are also proposing several terminals to "regassify" LNG in the United States to help make up for declining domestic production.

"You've got lower risk from an execution standpoint, I'd say the cost certainty is somewhat better, particularly from a labor standpoint, and the 'first-mover' advantage is hugely material at this point," Theal said.

"Most of these are coming on prior to 2010, so ahead of the window for Mackenzie."

The Mackenzie project was thrown into limbo two weeks ago when lead partner Imperial Oil Ltd. said the group was halting detailed engineering and contract awards, blaming spiraling cash demands from aboriginal communities in the Northwest Territories, and red tape.

The line would ship up to 1.9 billion cubic feet a day to southern markets from the Mackenzie Delta on the Beaufort Sea coast.

Imperial said it took the step partly because native groups demanded hundreds of millions of dollars from the companies in exchange for access to their lands, partly to fund social programs and infrastructure. It urged the federal and territorial governments to deal with these issues.

In his report, Theal said construction costs, due to soaring steel prices and a tight labor market, are escalating as delays persist.

Besides the Mackenzie Valley line and a spate of LNG proposals, oil companies are planning a $20 billion pipeline to major U.S. gas markets from Alaska.

With estimated North American gas demand increasing by an average 1.2 percent a year, and output from conventional fields slipping by 1 percent, new sources will have to add 26 billion cubic feet a day by 2020, the report predicted.

The same players proposing Canadian and Alaskan pipelines have plans to build LNG terminals with an overall capacity of 13 bcf to be on stream by 2010. More are earmarked for later.

Senior officials from the Canadian and Northwest Territories governments are meeting with all players to find a way to break the logjam facing the Mackenzie Valley pipeline.

On Tuesday, the governments announced Ottawa would provide millions of dollars in interim funding to northern communities for social and economic projects in an effort to ease the demands being placed on the project partners.

But Theal said only a new deal allowing the territory to collect and retain much more tax and royalty money itself will solve the problem. The governments said on Tuesday they were close to a draft deal on so-called devolution of powers.

"The government has to step in and show the Northwest Territories and the First Nations a direct stream of royalty and tax revenue that would provide them certainty," he said.

"That would also provide the producers certainty in the context of what the implications of cost are for them prior to this thing actually happening."

Imperial said it hoped for a solution to the land access and benefits disputes before a hearing slated for autumn.

Yep.......I am sure the federal gov't will fulfill the needs of the natives and pay them handsomely for their land. The way Canada is going the gov't will probably hand back all the land back up here to descendants of the first nations. I am leaving this weekend to find a bride on the reserve and I am not even Native American although I may have some past connections and am currently checking genaeological records...........In canada being a minority of any type opens your world up to riches and security.

All the more reason to build gas pipeline along Alaskan pipeline and have it end in Valdez; right away is there. For some reason, the oil industry is against this plan.

Most native villages up here are all for gasline development. No economy in the bush, the big problem. I have lived in several villages and oil industry employs many natives as guards, lifelong employment and they quit drinking themselves to death.

Indians don't have it that good. Half the indian kids are dead before the age of 25 and 80% suffer from FAS. They have just lost about everything over the last 100 years. Can you half blame them for not trusting their government.

The indians where I live really do live off what they catch and kill and not much else. They eat salmon for about 5 months in summer, caribou for a couple months when they show up in fall, kill/eat every porcupine they see, they actually live on rabbits they snare most of the winter(rabbits cooking on pan on woodburner in every cabin). If they as much as see a moose track, they follow it for days till they kill it. Eat ducks they shoot for about a month in spring and wait on ice out to catch grayling, then about starve waiting on the salmon to arrive. No joke, govt don't feed them much here in alaska. They are pretty tough to survive the minus 70 temps and are real decent once you get to know them.

You just got to be the only white boy in a village for a year to understand it all.

All the more reason to build gas pipeline along Alaskan pipeline and have it end in Valdez; right away is there. For some reason, the oil industry is against this plan.

Most native villages up here are all for gasline development. No economy in the bush, the big problem. I have lived in several villages and oil industry employs many natives as guards, lifelong employment and they quit drinking themselves to death.

Indians don't have it that good. Half the indian kids are dead before the age of 25 and 80% suffer from FAS. They have just lost about everything over the last 100 years. Can you half blame them for not trusting their government.

The indians where I live really do live off what they catch and kill and not much else. They eat salmon for about 5 months in summer, caribou for a couple months when they show up in fall, kill/eat every porcupine they see, they actually live on rabbits they snare most of the winter(rabbits cooking on pan on woodburner in every cabin). If they as much as see a moose track, they follow it for days till they kill it. Eat ducks they shoot for about a month in spring and wait on ice out to catch grayling, then about starve waiting on the salmon to arrive. No joke, govt don't feed them much here in alaska. They are pretty tough to survive the minus 70 temps and are real decent once you get to know them.

You just got to be the only white boy in a village for a year to understand it all.

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